|
Land
Trusts
By
Mike Jacka
Do you use Land Trusts, or do you put your investment properties
in your own name for all the predators and creditors to
find? I hope not!
In the early
90's we had a rental property in Minneapolis, MN. It was the
middle of January, and we had an ice/rain storm. Someone
that was just visiting one of our tenants walked out into the
rain, and there was about 1/2 - 1 inch of ice on the sidewalk, and
they fell backwards. That person cracked their head open and
had to be rushed to the hospital.
We thought
we had our assets covered. We had a landlords insurance
policy on the house. Even if that didn't cover it, we were
protected because the rental property was actually owned by the
corporation, not us personally. Boy, were we in for a
surprise when we found out we were being sued because the
insurance only covered so much, they were coming after us for the
rest.
To make a
long story short, they settled with the insurance company after all.
But their attorney told us, if we had more rental properties, they
would have come after us for everything, because we were negligent.
Negligent??? It was still raining when this happened, were
we supposed to be at the rental property chopping ice, while it
was still raining? I guess so...
That was
back in our beginning days, and we only had two rentals at the
time. I was renting myself, and my partners house was
mortgaged to the hilt, so the plaintiffs attorney found very
little to go after. I guess that was a good thing at the
time. But what about later down the road, when we had a
bunch of properties, what was going to stop something like this
from happening again???
It was
shortly after that, that we herd about Land Trusts. We went
to Atlanta to see Louis Brown do a Seminar about Land Trusts and Asset
Protection. That was back in 1994, ever sinse then,
everything I own is titled to a Land Trust.
Now a Land
Trust does not give you complete Liability Protection, you still need
corporations, LLC's, LP's or any other form of liability
protection. But a Land Trust is the first step of
protection. I am not going to get into asset protection and
liability protection through corporations, LLC's or LP's at this
time.
A Land
Trust keeps your name or your corporations name off
public records. It gives you a certain level of
privacy. If a sharp attorney finds out that you are the
beneficiary of the land trust, they can still come after you or
your corporation. But first the attorney would have to find
that out and that is not easy to do. Most importantly
though, most attorneys will not even bother to look far enough to
even figure out that your property is in a Land Trust, and even if
they did, they would not do anything about it, unless their client
gave them a big fat retainer before they did more research into
the ownership of the property.
Let me give
you an example of what I am talking about:
Let's say
someone wants to sue you. They contact an attorney.
The attorney does a name and asset search on you, but they don't
find anything in your name. But they do discover that the
property that their client told them that you own is titled to a
Land Trust. The attorney will then go to their client and tell them that they think they have a case, but it is going to
be a little more difficult to get to you because of the land
trusts. If they will give them a (let's Say) $5,000 retainer,
they will get started on it right away, but there is no guaranty
they will win or ever collect any moneys from you.
You see,
once the attorney sees that this is going to be a little more
difficult of a case, they usually will not work on a contingent
fee bases any more, they want cash, upfront. This usually
deters most potential law suits before they ever happen.
I am now a
Trustee for several clients. I could tell you many stories of
how some tenant, or any other person thought they hit the lottery
with one of my clients, only to end up walking away with a frown
on their faces once they found out how expensive it was going to
be just to find out what you really own.
And lets say
that you came across a sharp attorney that knew how to get through
the Land trust and get to you. And let's say they were
successful and won a judgment. That judgment would not
go on you personally, it would go against the Land Trust The
only thing the Land Trust owns is the one property. It will
not affect all your other properties, because they are all owned
in their own Land Trusts.
And let's say
you got into trouble with another business, a car accident or
anything else that has nothing to do with your investment
business, and you did get a judgment against you personally.
If you owned all your rental property in your own name, you would
have to pay off that judgment the next time you sold a
house. But if you bought and sold all your investment
properties through Land Trusts, then you would be able to conduct
normal real estate business and never have to pay off that judgment
until you felt like dealing with it.
There are
sooo many benefits to using Land Trusts, and I don't know of any
negatives related to using them. There is very minimal paper
work involved; that takes maybe 5 extra minutes to prepare.
There are no separate tax reporting issues to deal with because
the IRS considers a Land Trust to be a Flow-Through-Entity, which
means that you report the property on your own (or your
corporations) tax report.
I have a Special
Report on Land Trusts that you should have gotten when you first
signed up to this Free eZine (NewsLetter). If you would like
to read it again, you can get a copy of it by Clicking
Here
To your success,
Mike Jacka
www.realestatepromo.com
|
Printer Friendly Version
Email
Add to Favorites